Co-published project finance guide: Nigeria


smaller roles in producing assets. For financing oil and gas acquisitions in


Nigeria generally, a wide variety of structures are typically adopted. Structures will usually be selected taking into consideration a number of factors, including the level of security required by lenders, the time available to close the acquisition, and the availability and quality of assets at the sponsor and shareholder level. Lenders will typically look to the asset itself and to its revenue streams to secure any funding. Challenges exist with these options.


The challenges With respect to oil and gas assets in Nigeria, according to paragraph 14 of schedule 1 of the Petroleum Act (PA), the prior consent of the Minister of Petroleum is required for any assignment or transfer of a licence, lease or any associated right, power or interest. In practice, this provision is generally interpreted as requiring the consent of the Minister for the transfer of the legal title to an oil prospecting licence (OPL) and an OML to another party by way of security. Hence, ministerial consent will be required for the creation of a mortgage of an OPL or an OML. The process of obtaining ministerial consent under the PA is generally tedious and time consuming. Such mortgages of OPLs and OMLs are registered with the Department of Petroleum Resources (DPR). On the other hand, the creation of a


charge over an OPL or OML does not require prior ministerial consent. Unlike an assignment or a mortgage, a charge merely creates an equitable security interest over the OPL or OML in favour of the lender. This equitable interest is however not registrable with the DPR. This does not normally raise any concerns as the charge over the OML or other oil and gas assets will typically be part of an all assets debenture executed by the acquirer of the assets, creating a fixed and floating charge over all relevant assets of the acquirer. This all assets debenture will normally be registered in the company’s records at the


Author biographies


Ken Etim Banwo & Ighodalo


Ken Etim is the managing partner of Banwo & Ighodalo. He has been involved in nearly all of the firm’s energy and project finance transactions, and has immense skill and expertise in these areas of practice. An ardent negotiator, he is committed to ensuring that clients’ needs and expectations are satisfied to the smallest detail and is untiring in achieving this goal. His continued quest to always exceed clients’ expectations is a quality which endears him to both clients and peers.


Ken is the secretary of the energy and environment sub-committee of the business law


department of the Nigerian Bar Association. He is also a member of the Association of International Petroleum Negotiators (AIPN) and the Nigerian Maritime Law Association (NMLA) and has authored numerous writings in leading publications worldwide.


Dipo Okuribido Banwo & Ighodalo


Dipo graduated in the fifth percentile of his class in the University of Lagos in 2006 and was called to the Nigerian Bar in late 2007. He is presently an associate with Banwo & Ighodalo, one of the foremost full service commercial law firms in Nigeria. He has been with the firm for the past five years with the exception of a three-month period in 2010 (September to November) when he was seconded to Berwin Leighton Paisner (London) as part of the International Lawyers for Africa


Programme. He works primarily with B&I’s energy and natural resources practice group, but is also one of the firm’s leading tax experts. A member of the October 2009 class of NLI associates, Dipo was nominated for


professional of the year in the 2010 edition of the Future Awards. He is presently a member of the Association of International Petroleum Negotiators and the Chartered Institute of Taxation of Nigeria. He has published several articles on tax and other issues.


Nigerian companies’ registry, the Corporate Affairs Commission, thus still affording public notice of the charge. The risk will however remain that at the point of perfection of the security, the Minister may refuse to enforce the transfer of the OML to the lenders or their assigns. Previously, an option which was


employed to avoid the requirement for ministerial consent for the assignment was for the lenders to require that the relevant assets be held by a special purpose vehicle (SPV), whose shares could then be charged in favour of the lenders. By the strict language of the PA, the change of control


of a licence or lease holder was not thought to require ministerial consent. However, in the recent case of Moni Pulo v Brass Exploration, relevant sections of the PA were conclusively interpreted as requiring ministerial consent for circumstances of change of control of licensees and lessees. The effect of this case is that whether the charge is directly on the asset or on the shares of the licence/lease holder, the risk remains that ministerial consent may ultimately not be granted in the event of perfection of the security. Revenue streams from oil and gas assets


“The Nigerian oil and gas industry has historically been criticised for its low


contribution to GDP 84 IFLR/December/January 2013 ”


are another popular choice for securing acquisition funding within the Nigerian oil and gas industry. This form of security is not without its challenges. Under the Pre- Shipment Inspection of Exports Act and the Foreign Exchange Manual, companies are required to repatriate all export proceeds to an export proceeds domiciliary account in Nigeria within 90 days from the date of shipment. In addition, according to section 52 of the Nigerian Oil and Gas Industry Content Development Act, all operators (including Nigerian oil and gas companies)


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